The statutes and the shareholders’ agreement

When you form a limited liability company (“B.V.“) with someone else or join it as a shareholder, two important documents are at the heart of your relationship with the company and the other shareholders: the shareholders’ agreement and the articles of incorporation. While both are essential, they serve different purposes and have different legal implications.

What are bylaws?

Articles of association are the ground rules of a B.V. Articles of association are drafted by the notary when the company is incorporated. When the articles of association are amended, this is also done through the notary. The articles of association include the basic information about the company, such as its name, purpose, shares and decision-making rules. These rules are binding on everyone involved in the company and are made public through the Chamber of Commerce.

What is a shareholders’ agreement?

A shareholders’ agreement is a private contract between all shareholders and possibly the corporation. It goes into detail about things not in the articles of incorporation, such as about when and at what price shares should be sold, specific decision-making and dividend policies. This document is not public and allows shareholders to make mutual agreements appropriate to their situation.

The relationship between the bylaws and the shareholders’ agreement

Although the bylaws set the general rules of the company, the shareholders’ agreement allows for personal agreements between shareholders. The bylaws provide the framework, while the shareholders’ agreement fills in the details. It is important that these two documents not contradict each other. If there is a conflict, the bylaws usually prevail.

Judicial consequences of conflicts

Failure to comply with the bylaws can lead to legal disputes and even the nullity of certain resolutions. On the other hand, if shareholders do not comply with the shareholders’ agreement, it can lead to breach of contract, where the aggrieved party can claim damages. Also, the shareholder agreement often includes penalties in case a shareholder violates a certain condition.

Conclusion

It is essential that shareholders thoroughly understand the articles of incorporation and shareholder agreement and ensure that these documents are aligned. A good balance between these documents ensures smooth business operations and prevents legal problems.

Contact

Drafting articles of incorporation and shareholder agreements requires customization. It is important to consider which agreements you put in which document.

Do you need help drafting articles of association and shareholder agreements? Do you need tips? Or do you have a dispute about decision-making? Then contact one of our attorneys via the mail, telephone or fill out the contact form for a free initial consultation. We are happy to think along with you.